Extras on Excise: Why Riding a Bike Could Prove Taxing in More Ways Than One

As people get ready to take out their bikes this spring, they may have to take out their wallets as well. As more state and local jurisdictions are adding bike lanes, they are also entertaining proposals to raise revenues from cyclists by imposing bike registration and transfer of ownership fees.

For example, Honolulu is requiring those who own a bicycle with 20-inch-diameter wheels or larger to register their bikes. For a one-time registration fee of $15 or a transfer-of-ownership fee of $5, a bicyclist receives a decal for the tube on which the seat sits. The collected taxes are deposited into a special bikeway fund that may only be used for city projects and programs related to bicycles.

Some people have voiced concerns with regard to these fees. They argue that the government should subsidize behavior that society wishes to promote and tax behavior that society wishes to discourage or limit. Therefore, as one cyclist puts it, “[d]oes it make sense to also start taxing something that’s good for us?”

While using bicycles reduces traffic and benefits the environment, those in favor of bike fees point to the rising costs associated with providing bike lanes, planting new traffic signs, and maintaining bike share programs. Bicycle owners should pay their “fair share” for using the roads, they argue.

But opponents of these measures counter that bike-riding citizens already pay taxes that fund road repairs. Additionally, with such inexpensive registration fees, the revenue raised by these fees is not significant, the opponents suggest. They point to a $10 billion transportation package proposed by the Washington legislature, which projected that a $25 fee on sales of bicycles with a value of $500 or more would generate only $1 million in revenue over 10 years.

Enforcement is another issue. Last year, an alderman in Chicago proposed a plan to charge bike owners an annual $25 registration fee. But the mayor, faced with the challenge of curbing gang violence, responded that he did not want police distracted by monitoring compliance with the bike licensing requirement. Likewise, an Oregon bill that failed to pass last year was criticized for its enforcement and application to children. The 77th Session of the Oregon Legislative Assembly in 2013 introduced S.B. 769, which imposed a $10 registration fee for the operation of a bicycle, with $25 as a penalty for failure to register or report a change of address. The Oregon bill placed children between the ages of 12 and 16 within the purview of the statute, which made some believe that legislators were attempting to pass a law simply to generate any amount of revenue.

In addition to Oregon and Washington, Georgia and Vermont also unsuccessfully attempted in 2013 to pass measures imposing taxes on bikes. The level of activity in this area suggests that similar bills will be introduced in 2014.

Continue the discussion on the Bloomberg BNA State Tax LinkedIn Group: Do you think a bike tax is an effective way to generate revenue?

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By: Jessica Lechuga